Pricing for Products in Website-Dominant Static Group-buying

Sheng Li, Huifang Feng, Yu Huang

Abstract

We develop a game model to describe the game between a seller and a group-buying website in order to study the operating mode of Chinese static group-buying(GB). A seller sells products by a website and allocates a proportion of revenue to it. Based on this mode we establish the profit function of the seller and that of the GB website. The website decides its allocation proportion and the sale price of its products according to the profit maximization principle and the revenue sharing proportion in the contract. We then analyze the relationship among different parameters and find that the products’ price decreasing with the increasing of the revenue sharing proportion. In addition, there also exists an optimal GB period to maximize the seller’s profit in a GB.